Accumulating Patents at Universities

Most US universities maintain three core businesses that earn most of their revenue:

Selling diplomas

Competing for federal and industry research sponsorships

Trying to crack open the checkbooks of wealthy alumni

Since the 1980s, universities have ventured into a new line of business: patenting inventions from university research labs and brokering these patents to businesses and start-ups. Thirty years later, university patent holdings have swelled into the tens of thousands and larger research universities spend millions of dollars each year on filing for new patents. Yet, on average, over three-quarters of university patents are never licensed to companies for commercial use. Since US universities own 5% of our nation’s patents, and a growing number of patents in cutting-edge fields such as nanotechnology and biotech, even on human genes, people get worried that needlessly “locking up” basic university research will stifle innovation and create a patent anti-commons.

In the terminology of Henry Chesbrough, in the open innovation ecosystem, universities have branched beyond their traditional role of innovation explorers (they generate knowledge) to become innovation merchants (they license their knowledge to other organizations). While not everyone agrees it’s good for society for university’s to own and broker patents, from the perspective of business strategy it makes sense if a university files for a patent at the request of company that plans to license the invention.

What’s is harder to understand, however, is what motivates universities to continue to file for patents when there’s no licensee in sight. My question is are not intended to point the finger at the capabilities of university tech transfer staff who adeptly juggle large volumes of very complicated patent paperwork. Nor do I mean to question the effectiveness of any given university’s technology transfer strategy. I am genuinely curious.

Why university accumulate patents is a controversial, complicated and poorly understood topic. The debate around the topic brings to mind the seven blind men and the elephant. If you ask an optimist or a politician why universities continue to invest in unlicensed patents, they’ll tell you that it’s to incent companies to invest in developing a product, to motivate the faculty, and to make sure the university invention gets a fair shot at finding a home in the commercial marketplace. If you ask a pessimistic or someone who’s had a bad experience, they’ll tell you that universities file patents willy-nilly based on the political pull of the inventing faculty member. Or that staff don’t know what they’re doing. Or worse, that universities have become genteel patent trolls, guarding piles of un-used patents and suing companies and researchers that made money on an unlicensed university invention.

Some patent accumulation, perhaps, could be explained by the motivations above. However, the real reason universities end up with largely unlicensed patent portfolios is this: university patent accumulation is an unintended consequence of the inefficiencies inherent in our current university technology transfer model. The current tech transfer model creates a situation in which universities accumulate patents because they patent more inventions than they can license. Then, after a patent is issued, if there’s still no licensee in sight, a university’s technology transfer office is reluctant to let outside parties try their hand at finding a licensee in exchange for commission.

Two indications point to the fact that university patent accumulation reflects underlying inefficiencies in our current tech transfer model: one, data indicates that each year, university file for utility patents independent of that year’s licensing activity. Two, when comparing patent and licensing activity across universities of similar size and resources, the numbers are all over the map.

In theory, if a university only filed a utility patent application at the request of a company wishing to license the invention, there would be no patent accumulation. Although some universities report that this indeed, is their patent strategy, in fact, AUTM data from the top 50 US research university says otherwise. Most research universities file new utility patent applications without the presence of a signed license. If it getting patents was indeed a license-driven process, the chart below that depicts the number of utility patent applications vs. new licenses executive should look more like a line. (Other factors may be in play here: part of this seeming random filing could be that a single license covers several patents. Also, since a typical license takes 6-8 months to negotiate, some license completion may be spilling into over into the next year).

The only consistently demonstrated patent strategy across US universities was filing a provisional “placeholder” patent on new inventions to buy time to find a licensee and to figure out the potential commercial value and use of the invention. Across the board, most universities file provisional patents on roughly three-quarters of their new invention disclosures.

Perhaps since most utility patent applications are not motivated by company request, nor directly related to a university’s three core businesses (teaching, research and alumni donations) AUTM data indicates that patenting activity between university varies wildly, even between universities of similar size, funding and technology transfer activity. (For a clearer picture, I pulled out the California and Texas systems since their research funding and number of new disclosures is significantly higher.) University patent-related activity is all over the map. For example, at leading US research universities in 2009

A few universities filed zero utility patent applications; one filed more than 200

Some universities filed 50 to 60 new provisional patent applications, while another university with similar resources filed more than 300 new provisional patent applications

The percentage of provisional patents filed per utility patents filed was completely inconsistent across universities. For example, one university filed 145 provisional patents and not a single utility patent application. The same year, another filed 221 utility patent applications and only 134 provisional patent applications.

Spending on patent-related expenses ranged from less than a million dollars at one university, to over $16 million at another

The fact that universities file for patents without a clear commercial license in sight is not necessarily a bad thing, despite legitimate concerns about the impact of patent accumulation on our innovation ecosystem. Nor is it necessarily a bad sign that across universities file for patents in such widely varying numbers and with no apparent underlying strategy. As patent brokers, universities have the right to take an individualistic approach that reflects their own unique internal logic and is driven by local need and local mission. Extreme local variance could indicate an underlying strategy unique to that university’s areas of research expertise. If patent filings reflect the number of high-potential new inventions that came in that year and are based on sound market research and an intelligent case-by-case basis, then cross-university variance may simply indicate diligence and adherence to a locally-defined patent strategy.

At the end of the day, a university’s relationship with its patent portfolio is a complicated one. In comparison, a company’s patent strategy reflects and is a tool to support its larger business strategy (see the fantastic Kauffman-funded report by Ted Sichelman and Stuart Graham). It’s not so straightforward with university patent strategy. The current technology transfer method rests on a model in which universities attempt to be innovation merchants, despite the fact their core business is not brokering IP and the patents they broker have no relation to their core revenue streams.

A hefty patent portfolio does not attract tuition-paying students and does not play a part in faculty advancement.

Federal funding isn’t allocated according to universities that own a particular type or certain number of patent.

Companies bearing research sponsorships are typically drawn by faculty expertise and university research capabilities.

Alumni donate money because they get their name on a bench.

In other words, successfully licensing university inventions is an incredibly difficult task! Patent accumulation is not the fault of under-performing tech transfer offices, nor the malevolent master plan of greedy university administrators or faculty. Instead, it’s much more subtle and complicated than that. Universities simply don’t have the same incentives for filing and hanging onto a patent that companies and startups do. Nor do they have the same resources and business models that permit IP brokering companies to succeed (although even successful IP brokers accumulate patents and regularly go out of business).

Why do universities own significantly more patents than they can license? Well, for several reasons:

Being a patent merchant is darn hard work and even the best IP brokers end up with more inventory than they can sell

Patents that staff can’t find licensees for are set aside and no longer marketed. Most universities are reluctant to permit third party agents to take over their commercialization process

Picking out patents that may have future commercial appeal is nearly impossible given the fact that by design, most university research is early stage and covers a huge range of territory

Releasing patents into the public domain or regional IP pools is scary and involves its own legal and political complications;given the fact that patents can costs tens of thousands of dollars, letting patents loose is difficult to fiscally justify

Licensing unlicensed patents older than 2-3 years with non-exclusive, royalty-free, no cost, no terms, “go in peace” license may not please some companies, but it may lure others out of the woodwork; again, hard to justify, may invoke resistance from inventors; politically risky

Staff are given too many patents to handle; finding the right companies to invest in one’s raw IP is time-consuming and sophisticated work

Universities don’t get to choose their patents or develop their portfolio in a particular direction, say becoming a “nanotech specialist; patents get dropped off at the door

Universities don’t need their patents to build up their core business; university technology transfer is a sideline at most universities, not a core function

It’s not unusual for patents to be pursued at the request of a faculty member, even though there’s no commercial interest in the technology

The number of patents issued remains a core “performance” metric at many university technology transfer office

We should turn the debate away from the supposed motives (both for good, and for evil) underlying university patent accumulation. That debate barks up the wrong tree and doesn’t provide a solid foundation for stakeholders to rationally think about what to do next. Here’s what comes to my mind:

Does patent accumulation harm anyone? If so, whom and how?

Is getting and hanging onto unlicensed patents worth the university’s time and money?

After 30 years of the current model, are universities effective innovation merchants?

If you think change is needed, what, specifically would help?

Would the introduction of commercial free agents into the university tech transfer process help break up the back log of unused patents?

Melba Kurman writes and speaks about innovative tech transfer from university research labs to the commercial marketplace. Melba is the president of Triple Helix Innovation, a consulting firm dedicated to improving innovation partnerships between companies and universities.

10 comments

Looks to me that those Universities with Profs who know how to file Provisional Patents “win” use Google and search for provisional patent video course to see how YOU can do it for YOUR school! COme on guys and gals! Do it for your alma mater! See here if the link works: https://provisionalpatentvideo.com/ you can do it in an evening faster than your dynamics and fluids homework!

In research universities a great deal of the pressure to patent in from faculty. Patents do provide cache even when the faculty have no direct interest in commercialization. Tech transfer offices have great difficulty in resisting faculty, particularly when the researcher is highly regarded and a recruitment target.

I am unconvinced that large corporations are any more strategic or efficient in managing their IP portfolios. The study you alluded to is on startups only. More established companies (better analog for universities) have piles of unexploited patents, so much so they have started giving them away. I’ll wager that a good deal less than 25% of their portfolio is deployed. When it comes to companies that do contract research (e.g. defense contractors) I suspect the percentage of IP that is commercially exploited is in the very low single digits. I know this to be the case with three brand name contracting companies.

Patents don’t do much for most faculty. I’ve seen a number of colleagues go through the motions, with no measurable outcome. Bear in mind that *The* measure of productivity for faculty at R1 schools which affects their rate is the number of citations… or some formula based on that (h-index or m-index). Patents are very rarely cited. They do look nice on a CV but that’s about it. And then there is this huge step between disclosing and commercializing that most faculty know little about, and university patent foundations rarely have the reach to find good license partners.

Where I have seen patents achieve real value is in the context of a university-associated research centers with a focused mission; there, IP scouts actually push the faculty and other researchers to disclose. But without that “incubator” environment, frankly, there isn’t much to encourage disclosure of valuable IP nor to assess the real value. *Most* university IP gathers dust and goes nowhere, whether it’s patented or not.

It’s true that contractors (e.g. DoD) rarely exploit IP, but the reason for that is that those people usually work at a DoD site, in collaboration with government-side individuals. In that case, despite the provisions in the FARs/DFARs, it’s very tricky to generate license revenue- there are a lot of overlapping interests and clients tend to perceive license revenue as double dipping. I have encountered this sensitivity on several occasions. Those contractors who do generate license revenue from IP typically have their own bona fide research facilities e.g. Lockheed, Northrop-Grumman etc. Companies whose employees work mostly at client sites rarely dabble in any real commercialization.

Another great blogpost, Melba! You raise some interesting points. I too have always been astounded at the number of dead weight patents and patent applications at TTOs. In my experience, the number one reason that Universities file provisionals is that an inventor gets a manuscript accepted for publication and then suddenly realizes that he/she only have a week to get the invention filed before the invention gets published. (In many cases, this is a well planned tactic by inventors who game the system.) The Licensing Manager then scrambles to pull together a quick and dirty provisional application to protect the idea. However, the early stage research is so rudimentary, there is no true proof of concept from a licensing/marketing standpoint. Years may go by before the concept is truly proven for commercial purposes and the Licensing Manager can’t do a thing to change that fact. In the meantime no company or entrepreneur is interested in taking a license. Early stage research can sound great on paper, but until a third party can repeat the data, it’s not likely to go anywhere.

What I find fascinating is that many of those provisionals are converted into utility patents without first doing a thorough technology and market evaluation (novelty, market potential, ability to police the patent, etc.). Licensing Managers are overwhelmed by heavy workloads, so I can understand why – but this is the point at which consultants can and should be hired to conduct evaluations. You can find experts in any given field, so the evaluations can be done by people familiar with the specific industry. Not only would this knock out patenting ideas that won’t succeed, but these experts can also provide input on what research goals must be achieved to provide enough evidence to attract commercial prospects. Having that third party input also helps take politics out of the equation.

In addition, I will say that Universities often over-value early stage inventions. I don’t know if it’s pride or ignorance, but if an entrepreneur is willing to take on an early stage unproven concept, then the Universities need to give them a break on the outrageous price tags. High royalty rates and all patent costs (even badly managed patent costs), plus significant equity AND multi-million dollar milestones are simply not in line with the level of risk involved in creating such a company. In that case, Universities deserve to sit on their dead weight patents and all the associated costs.

In my experience at a number of different Uni TTOs there is a reluctance to kill projects where the IP is not progressing towards a commercialisation outcome. Therefore the Uni continues paying patent examination and maintenance fees/annuities where there is no hope to recoup the expense or deliver an outcome for the Uni or faculty.

Use of an independent expert as suggested above is a great idea if it helps sort of the dead projects. Particularly before they eat into the patent budget. If the inventors want to progress the patent they can be involved in identifying and engaging licensess, discouraging the serial inventors from quickly moving onto new research ideas.

Filing new provisionals and then seeking a license is a common route and its a valid strategy for the TTO, but there must be a willingness to fail and to fail quickly (entrepreneurs usually understand this concept), but without discouraging those faculty members who show enthusiam for patenting. After all there will be many more opportunities coming to the TTO.

A very interesting analysis. And while patents lay fallow with other owners, it doesn’t lessen this basic truth that universities accumulate patents due to imbalanced emphasis – resources and strategy – on protection over practice.

I am happy to see someone raises these points in a fair manner. As a practitioner of university-based tech transfer for over 15 years, I would also add another motivation for patent accumulation: fear of letting the “big” one get away. The net effect of an excess of too much ownership (including IP) is well considered in “The Gridlock Economy” written by Michael Heller Vice Dean of Research at Columbia Law School.